Relationships of ownership, they whisper in the wings …

Rakesh Khurana From Higher Aims to Hired Hands: The
Social Transformation of American Business Schools and the Unfulfilled
Promise of Management Education, Princeton, N.J., Princeton University
Press, 2007 (531 pp). ISBN 9-78069112-020-1 (hard cover) RRP $59.95.

The history of the present, Michel Foucault once remarked, is ‘a
history of the different modes by which, in our culture, human beings
are made subjects’ (1982, p. 208). Rakesh Khurana’s From
Higher Aims to Hired Hands: The Social Transformation of American Business
Schools and the Unfulfilled Promise of Management Education offers
an exemplary account of how what became one of the major institutions
of the contemporary era has gone about constructing the subjectivity
of those who passed through its gates and the particular kinds of Eden
whose metaphorical promise attracted them.

The business school had humble origins, in commercial colleges and trade
schools, as a part of vocational education, before it was instituted
as a part of the University of Pennsylvania in 1881. Once incorporated
in the University it became a part of an institutional nexus being forged
from ideas about what constituted science, the professions, and research.
Given the origins of modern industrial capitalism in the United States
in the last quarter of the 19th century and first quarter of the 20th
century, and the colonisation of its intermediary functionaries, the
managers, by engineering discourse that promised to instil efficiency,
equity and industrial harmony, the professional rhetoric of the new managerial
project was largely constituted in terms of norms of technical rationality.
The key conceptual idea of efficiency was one that readily translated
seamlessly into the neo-classical economics and economic rationalism
that would later come to dominate the business schools in the 1980s.

Management as a profession offered the promise of ‘scientific
modernity’—a rationally ordered world, populated by rational
individuals, capable of scientific analysis and modelling that could
be put to practical use in conducting the affairs of men (all the early
texts concerned with management students assumed that they would be men)
in ways that also appealed to an ethic of service, a sense of a calling,
an idea of duty rather than merely business. In the conception of the
19th century founders of the business school model, management as a profession
would become an occupation that could claim both exclusive expertise and
an ethical ground for practice. The expertise, especially after
the widely circulated rhetoric of F.W. Taylor (1911), was to be premised
on a rationality conceived as if it was a science, while the ethical
dimension of professionalism would derive from that science being applied
in the service of a calling. In the longer run, especially after the
Second World War and the production of several important reports in the
1950s, which we shall attend to below, the ethics were subordinated to
rationality in a Cold War context where to be ethical and rational
was easily accommodated in the glorious fictions of the market.

Management as a profession offered
the promise of ‘scientific modernity’.

How to translate these ideals in to a practical curriculum has been
a perennial problem. Many early curricula were extraordinarily pedestrian,
and theory and rigour were more noticeable by their absence than presence.
Although the American Association of Collegiate Schools of Business (AACSB)
began to organise the institutional field from 1916 onwards, it did so
with little sense of strategic purpose in forging norms of professionalism
in standards, curriculum, or research ethos. The Wall Street Crash of
1929 condensed and concentrated key issues for many observers. First,
to what extent were business schools culpable in having not taught ethical
ways of behaving and in having taught ways that were not ethical? Second,
what should business schools do to ensure that a new business culture
would be created? These questions were at the top of the agenda during
the New Deal era of the 1930s, when the very model of American capitalism
was under widespread attack and its legitimacy not at all taken for granted.
New issues of regulation, public sector management and business/society
relations entered the business school frame at this time.

The Second World War had a profound effect on the institution of the
business school, as it did on all other institutions of American life.
The United States won the war, it was widely assumed, because their forces
were not just overwhelming and unblooded by campaigns on the Eastern
Front, as were the German troops that they faced, but because of the
organisational expertise and precision of the planning for the Normandy
landings. Moreover, while the other armies made some use of new social
science techniques of personnel selection and training, none did so with
the energy, efficiency, and sheer scale of resources of the United States.
From this energy and these investments, new research topics, approaches
and funding developed rapidly, and massive new organisations mobilising
millions of people were constructed and experienced. In the post war
era the realisation was that the new society of the ‘organisation
man’ (Whyte 1960) required a commitment to technically-rational
skilled management if it were to function effectively.

After the Second World War and the Korean War, hundreds of thousands
of men who had experienced the organisational society at first hand in
the military were re-mobilised into the universities by the GI bills.
Many of these men were attracted to business degrees as a way of preparing
for life after war, and so demand outstripped the supply of competent
instructors. In the 1950s, the Ford Foundation and the Carnegie Corporation,
recognising this, and realising that the pre-war footings of business
education were not settled, deployed extensive rhetorical and pecuniary
resources in building a commitment in the elite Schools to research-based,
social science, quantitative and disciplinary knowledge from fields such
as sociology, psychology, economics and other social sciences. Major
book-length reports were published in 1959. In many ways the Ford Foundation
and the Carnegie Corporation presumed the role that the accreditation
agency, the AACSB, was too weak to assume. Journals began to proliferate
and the basics of the modern systems of research excellence were established
on the disciplinary foundations laid down at that time, with psychology,
sociology and economics as the key disciplines. However, by the 1980s,
economics was to break free of the other disciplines in ways that would,
in every way, be deleterious for the professional aims of an ethical
business vocation that initially motivated those institutional entrepreneurs
who first founded the business school.

The idea of being educated took
a back seat to making fast bucks.

The age of the organisation man extended into the 1970s but the combined
effects of Oil Shocks, the collapse of the Bretton Woods international
monetary arrangements under the costs of financing Vietnam, and new competitive
challenges from overseas, notably Japan, saw the model on which it was
based falling apart. The post war theory of organisations, emerging from
Weberian accounts of bureaucracy, had secured the intellectual foundations
for the organisation man. But in the 1980s there was a sustained attack
on these foundations from new rationalising tendencies within economics
as a discipline. Organised around transaction costs analysis and agency
theory, these tendencies launched an all-out assault on managerial capitalism,
arguing that the only professional duty any manager owed was to the market,
and systematically valorising the market as the supreme and only significant
institution in the business school environment. Efficient markets were
the new dogma and shareholder value the new mantra.

These changes occurred at a time that the economists’ outputs
from the business schools were being used, reflexively, to design the
very conditions in practice that were postulated in theory. The era of ‘fast
capitalism’ was emerging, in which the first movers to use economic
innovations, such as ‘junk bonds’, heaped great rewards by
being early to market. The same mechanisms were later to be seen in the
use of collateralised debt obligations and other financial instruments
which precipitated the sub-prime crisis of 2007.

Within the business schools, at first, not everyone noticed: the financialisation
of everything did not gather full steam until the new century, and the
disciplinary silos had a certain inertia attached to them, especially
for the most productive researchers recruited from the older social science
disciplines. In the United States some fields, such as organisation theory,
fragmented a little; elsewhere where the quantitative and anti-foundational
assumptions of American disciplinary formations were not as entrenched,
they fractured more, into rival schools and paradigms, often cloven by
philosophical and research style differences that centred on more qualitative
enquiry.

The economists, however, got on with business. And they cleaned up.
They cleaned up capitalism, making it more vigorous, rugged, and shareholder
value-oriented. They also cleaned up in the business schools, as well
as the economics faculties. They produced a generation of what Michael
Pusey (1991) came to call ‘economic rationalists’, whose
solutions were widely spread in Australia, at least, through governments
and the bureaucracies. The managerial capitalism of the post war era
was in decline, as was preparation for managing within it, despite the
disciplinary institutionalisations that had supported that training.
Resources and students shifted to ‘strategy’, taught as a
formulaic and abstract knowledge. Business school student numbers continued
to increase and standards were extremely variable across institutions;
the AACSB played a belated catch-up role in accreditation.

By 1988, however—when Business Week opened the floodgates on rankings
of business schools, using criteria from the market rather than from
the academy—the institution of the business school began to weaken
before the institution of the market. Rankings became decisive in signifying
prestige as well as in attracting students and resources. The students
were increasingly into ‘fast capitalism’; paying big fees,
they wanted fast-tracks to consulting and financial careers, and sought
the instrumental tools to take them there. General management, and the
idea of being educated for it, was a victim of these new trends. Indeed,
the idea of being educated seemed to take a back seat, suggests Khurana,
to making fast bucks. Long term observers of the business school scene,
and undoubted intellectuals, such as Jeffrey Pfeffer and James March,
argued that the institution had lost its way and stood for little other
than fast bucks, anyway, anymore.

Almost anyone can call themselves
a manager, from kids working in McDonalds upwards.

Where institutional purpose was sought in the 1990s, it converged on
the idea that business school education could equip the next generation
for ‘leadership’. In Australia, this notion found echoes
in the Karpin Inquiry into Leadership and Management (Karpin 1995). This
report identified failures of management, and especially leadership,
as the Achilles heel of the micro-economic reforms ushered in during
the Hawke-Keating era. Unfortunately, the Report was published shortly
before the Keating Government lost office in 1996 and little of its agenda
was adopted or followed through by the incoming Coalition government.

Today, suggests Khurana, business schools are in crisis. The financialisation
of everything has helped bring about the present credit crunch. The ‘economisation’ of
the business schools has, he suggests, been anathema to the development
of a broadly professional project. Markets without morality cause widespread
social malaise. Business schools are deeply implicated in the worst excesses
of contemporary approaches to business; they are insecure about ethics,
and they often lack professional purpose. They never achieved their early
aim of a professional vocation and, when the world of the organisation
man slowly crumbled in the 1980s, what was left was an ethos of managerialism
premised on measurement.

Khurana is not altogether pessimistic; he believes that the time is
right for business schools to discover a commitment to professionalism,
based on leadership that will educate, train, and inspire, and reclaim
their rightful place in the respect of their peers. As an explicit model,
he suggests the professionalism of the military, such as is found at
West Point.

I have my doubts about the renewal of the professional project. These
doubts take me to what is absent outside the Gates of Eden. First, note
that Law, Medicine, Dentistry, Veterinary Science, and other professional
disciplines, are all premised on a licence to practice. You cannot operate
as a professional in these disciplines without virtue of an exclusive
licence that the state polices. These professions have an effective monopoly.
Such a situation has never prevailed in business and never will, because
of the famed creative destruction and dynamism that drives it. Anyone
can become a business person, and many who would be better advised not
to do so, do anyway. Almost anyone can call themselves a manager, from
kids working in McDonalds upwards.

Second, note the institution of the business school and the institution
of the business school differ markedly. The former is oriented
to the institutions of research, peer-evaluation and competitive journal
publication. It demands scholarship. The latter is oriented far more
to whatever is current and hot in business circles. If private equity
is flavour of the moment, or e-everything, so be it; that’s what
technicians will be expected to be competent in, and what the students
will want to do. Flavours demand technical ability but not necessarily
scholarship.

The book should be compulsory
reading for all Deans of business schools.

How to respond to such contexts becomes deeply problematic for Deans
and their executives. They try and stay close to the big end of town,
which feeds the pressure to be relevant to executives (however, loosely
defined) and business in general. Some professors routinely seek to scent
money and track it down. At the unreflexive and often very prestigious
end of business schools, corporate hagiographies are routinely served
up in an atmosphere that celebrates and mythologises ‘It’ firms
from the corporate world. Gary Hamel’s (2000) fawning admiration
for Enron is but one instance of this. Meanwhile, university executives
want the income from yet another notching up of numbers and are disinclined,
until crisis occurs, to address the issue of standards. Whatever research
and publications emerge from this conjuncture will be celebrated.

The Gates of Eden look different in different countries as well. They
have different approaches. In Australia, the development of business
schools was subject to a late development effect, with only one School,
The Australian Graduate School of Management, formally established in
the late 1970s. Additionally, both the generous Foundational and Corporate
support of the elite and regionally significant schools and a defence-led
infrastructure of grant-giving are absent in Australia. Moreover, in
the climate of under-funding of universities (compared with other OECD
countries) that has prevailed here, business schools have come to play
a specific, new role. They transport people from other countries through
the Gates of Eden, people willing to pay for the privilege. Many of these
students seek to maximise their chances to gain citizenship by accumulating
the greater residency points that accrue to those with professional accreditation
in fields such as accounting, thus skewing the financialisation of everything
even further. The universities gain some needed income; enrolments shift
systematically to and within the business schools, and standards drop
as the sometimes barely linguistically competent are flown in to swell
the coffers by the jumbo jet load. Deans and university executives then
have to manage a difficult conjunction: increasing pressure from students
in areas that cannot attract sufficient or the best staff because their
graduates can make more money as financial technicians than as researchers
and instructors while those areas that attract the best researchers—on
the normal peer-reviewed criteria—are more often than not in areas
where there is least student demand, fuelling tensions further.

Irony is piled on irony. The most orthodox economists have done a better
job of deconstruction than the most able postmodernists. They have torn
down the chances of an ethos of profession, sacrificing it on the altar
of the market. It was the relations of ownership, whispering in the wings,
which were to run the show eventually. Sure there was some early front-stage
work that differed, and which has occasionally been dusted off at moments
of crisis … but its truths did not last. Indeed, ‘there are
no truths outside the Gates of Eden’. Both Foucault and Dylan should
teach us that.

Khurana has produced an excellent institutional history, albeit one
in which many of the ingredients were already well-known from earlier
accounts such as that of Shenhav (1999) for the early years, Donaldson
(1995) for the economisation of management theory, and Pfeffer and Wong
(2002) for the impact of recent developments. However, these separate
accounts had not been stitched together over such a broad canvas as Khurana
constructs. The book should be compulsory reading for all Deans of business
schools with a concern to learn from history. I predict few takers.

Stewart Clegg is Australia’s leading Professor of Management and works at the University of Technology,
Sydney. He has produced a great many monographs, collections, special
works, encyclopedia, handbooks, and top-tier refereed journal articles.
Among his more recent books are Power and Organizations (London,
Sage, 2006, with David Courpasson and Nelson Phillips), Managing
and Organizations: An Introduction to Theory and Practice (London:
Sage, 2008, with Martin Kornberger and Tyrone Pitsis), and The
International Encyclopedia of Organization Studies (in 4 volumes)
(Thousand Oaks, CA: Sage, with James R. Bailey). He is yet to write
a book about Bob Dylan …